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Quantitative Finance · Glossary

What is Crowding, crowded trade, comomentum, unwind?

Also known as: crowding · crowded trade · comomentum · unwind

Definition 28.3 Research Craft: Predictors, Backtests, Measurement, Portfolios · Chapter 28 — Capacity, Decay and Crowding

Crowding is the presence of many investors in the same positions; a crowded trade is a position held by enough of them that their joint exit would move prices. Comomentum (Lou and Polk) is the average correlation of the abnormal returns of the stocks a momentum strategy holds, a measure of how many traders act on them. An unwind is the rapid reduction of a crowded position by some of its holders, which moves the prices at which the others mark theirs.

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